Lessons in Fear and Wealth from the Coronavirus

As I write this, the biggest story in the entire world is a virus that is making its way around the planet, leaving a trail of sickness and death in its wake, while sending a much bigger shockwave of fear and uncertainty out front. Last week, the US stock market dropped 15% in just a few days, the most shocking correction since the 2008-2009 financial crisis (and the most interesting drop since the founding of this blog in 2011).

I am sure you’ve been hearing, reading or watching plenty about it already, but the real question is, what should we do about it?

The Scary Side

Is this a screenshot from the fear-mongering TV news? Nope, just a moment from a classic zombie movie, although sometimes it is hard to tell the difference.

The fear and doubt seems to be what the news stories have been emphasizing. The disease is highly contagious, and very sneaky. Each carrier seems to infect 2-3 additional people, which means exponential growth. And with an observed death rate of about 1% so far (on a limited data set of older people on a cruise ship) it may be several times times more deadly than the common flu.

On the news, we see rows of hastily installed hospital beds, people wearing paper face masks even here in our own country, empty supermarket shelves and shuttered factories and public venues.

And we are reminded that we ain’t seen nothing yet, because with mild symptoms that can hide for days, most cases are going unreported and the disease is pumping its toxic tentacles through the arteries of our economy, plotting its attack while we are left POWERLESS UNTIL THE RIOTS IN THE STREET START AND PEOPLE ARE SMASHING THROUGH OUR WINDOWS TO TAKE OUR LAST FEW CANS OF BEANS AFTER WE RUN OUT OF AMMO IN OUR SHOTGUNS.

Some people are just prone to this type of thinking, and I even have a few in my own life. They have warned me to gather “at least a few months worth” of nonperishable food in my pantry and make sure I have a generator and plenty of fuel, at the very least. And to reconsider my stance of not keeping any guns in the house.

The Not-So-Scary Side

I went out on the town early on in the scare. The reality was different from the news headlines, although restaurants did close a few weeks after this post was first published.

As I write this on March 2nd, there have been about 90,000 confirmed cases of COVID-19. And while the number is still growing rapidly, at the moment it is still a tiny number, about one thousandth of a percent of the world’s population. So even if it multiplies 100-fold, it would be a tenth of one percent. And out of these 90,000 people, about half are already recovered and have moved on with their lives. And the vast majority of the remaining ill, and all those who are so far undetected, and those who are yet to get infected, will also recover.

Past and current status of the outbreak.

But do we have any idea how bad it will get, before it gets better? As it turns out, we do. But first, some perspective.

Here are this year’s numbers for the tried-and-true traditional flu for the 2019 flu season in the US alone (and remember the USA is only four percent of the world population):

Wow, 32-45 million cases of the flu already, and tens of thousands of deaths. Even I had no idea it was that serious, and yet the flu is something I don’t even worry about – ever!

Even scarier: every year, about 2.8 million people die in the US alone, and a full 70% of these deaths (over two million people per year) are caused by “lifestyle factors”, which to put it plainly means ignoring Mr. Money Mustache’s advice about bikes, barbells and salads every day.

So if we start with the common flu, which is surprisingly scary, choosing car-based transportation and TV-based entertainment and consuming processed high-carbohydrate food and soft drinks should feel at least an additional hundred times scarier than that.

But do you feel the appropriate ratios of fear in these two situations? And a much smaller amount of fear about the Coronavirus? Probably not, because we humans generally suck at putting numbers, statistics and probabilities into perspective.

We Have Been Here Before

In my lifetime alone, we have seen the rise and decline of quite a list of worldwide health scares, each of which was covered in the news with similar intensity to what we see today. AIDS, Ebola, SARS, Bird Flu, and the 2009 Swine Flu pandemic, also known as H1N1. That one was particularly serious in retrospect, having infected between 11-21% of the world’s population and taking the lives of about 500,000.

Yet here we are, with that fearful event gone from the rearview mirror and a global economy that is far richer than it has ever been. Which is exactly what we will eventually be saying about the present moment in time, from our vantage point in the even more prosperous future.

And Math Can Help Create Perspective

Contagious diseases don’t just grow forever until everybody is dead. They follow an S-curve, like this recent prediction for Covid-19’s spread. It currently estimates that we may see things flatten out fairly soon, but more importantly it continually updates to new information and makes an educated guess – a great strategy for dealing with unknowns in life in general.

One mathematical model that a researcher is updating each day – image source.

On the other hand, some estimates are more pessimistic. Disease modelers at Northeastern University used different assumptions in mid-February to predict between 550,000 and 4 million cases in China*, before we reach the flat top of our “S”. That because of extreme quarantines, that turned out to be pessimistic as well and China flattened out well below 100k.

So let’s imagine that a 4-million outbreak happened in the rest of the world. That’s still only a twentieth of one percent of the world’s population who would even get the disease, and then a further 99% of those would recover. Again, it’s too early to guess the world numbers, and I’m not qualified to do so. But it’s always important to put things into context of the almost eight billion people on Earth – that’s a deceptively large number.

As a final source of information, when it comes to world health issues I always like to see what Bill Gates has to say. And sure enough, he written this great opinion piece in a medical journal and an even better Ask Me Anything on Reddit. His main point? The damage done by a virus really depends on how well our governments respond to it. Lots of caution and a quick response leads to much better results.

So there’s still a lot of uncertainty. But when faced with a lack of information, we can choose one of two options on where to learn more:

  • Good looking news anchors with fake tans and no scientific background, who make more money if they generate more viewership hours and advertising revenue, which is proven to multiply if they can cause their viewers to experience fear, or
  • Scientists and mathematicians who study this stuff for a living, and use incoming data to make a series of continually refined predictions.

As Mustachians, we get our information from scientists rather than news anchors and politicians, and then we choose a course of action based on what is in our circle of control. In the case of the Coronavirus, I would say that means taking the following steps:

  • Continue the usual program of living a healthy life. Just the incredibly simple steps of cutting cars, sugar and television out of your life as much as possible will virtually eliminate the 70% fatality risk factor of being inactive and unfit – and yet only a tiny percentage of people – even those lucky enough to still have fully able bodies – actually follow this advice. On top of that, this strategy will also greatly boost your immunity to Covid-19, and decrease your chance of serious illness or death if you do catch it.
  • Don’t try to out-guess the stock market. Just celebrate the fact that we have a temporary sale on stocks. While the endless stream of meaningless market commentary every day means absolutely nothing, one fact remains indisputable: stocks you buy today at a 15% discount from their peak, will be 15% more profitable for you over your lifetime.
  • And finally, still important but statistically less urgent is taking actual steps related to dodging this and other viral illnesses. Wash your hands a few times a day and avoid unnecessary large gatherings of people in close quarters, until the health organizations tell us we are in the clear.

Guns and ammo and a bunker full of canned beans not required.

* a really interesting quote from that same article about the size of the uncertainty around diseases:

” In the autumn of 2014, modelers at CDC projected that the Ebola outbreak in West Africa could reach 550,000 to 1.4 million cases in Liberia and Sierra Leone by late January if nothing changed. As it happened, heroic efforts to isolate patients, trace contacts, and stop unsafe burial practices kept the number of cases to 28,600 (and 11,325 deaths). “

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  • Mary March 4, 2020, 1:24 pm

    Holy Cow! I am in north San Diego and I was at Costco this am – I like to get there when it opens to slip in and out. I got the few things I needed but the cash registers were like 5 people deep! I then saw almost every other basket had toilet paper. I was just wondering if there was a coupon I missed when I realized these people were stocking up because of the virus scare. I then noticed the pallets of water people were buying! Then in the parking lot there were so many cars it was 3 deep for my spot (this is like 10:30!) It was like Christmas rush. I started worrying that I didn’t buy any water or TP but talked myself off the ledge. Mob mentality is a powerful thing!

  • Chris March 4, 2020, 1:39 pm

    Let common sense and science prevail! Interesting upside for me is that I am moving to Vicenza Italy and will be buying a home. It’s currently the COVID epicenter. The fear and lack of buyers is depressing the market which benefits me!

  • Joe B March 4, 2020, 1:55 pm

    Just bought 10 more shares of VTI!

  • anja fiscker March 4, 2020, 2:06 pm

    This topic will only continue to be hyped until we have the next mass shooting or other natural or man-made disaster. Tornado season is just around the corner, and aren’t those wildfires still burning in the Amazon? At least AUS got some relief after 240+ days. As a cyclist and daily walker, I’m much more concerned about these stats and being disenfranchised and marginalized while I’m not harming our planet and subtracting motorized traffic https://www.washingtonpost.com/local/trafficandcommuting/distractions-drinking-and-darkness-contribute-to-rise-in-pedestrian-deaths-report-says/2020/02/26/71a93408-58f0-11ea-9b35-def5a027d470_story.html

  • Steven A March 4, 2020, 2:18 pm

    It is a bit too simplistic to blame “the media,” an unhelpful term that suggests a monolithic state that really does not exist. Has some journalism been more sensational? Absolutely? But I have read far more factual reporting and thoughtful analysis.

    Our government’s communication strategy also is to blame as the initial lack of transparency, dismissive tone from key figures, and absence of useful information at the same time of major actions being taken in Asia did not inspire confidence.

    Finally, as MMM notes in his post, each of us has agency as to how we respond in these situations. So if mass panic ever does occur, those in panic mode are complicit to some degree.

    • Jade March 10, 2020, 9:11 pm

      Thank you. Blaming the media is just a modern form of scapegoating. It’s easy, and because few people actually know someone who works for the media, it’s always journalist season. What’s lost is that the media are *businesses* that want to make that good ol’ American PROFIT, so they give us what research shows we *want* (but are ashamed to admit) — DRAMA!

      [signed, an underemployed former newspaper journalist who can no longer get work in journalism thanks to the slow death of newspapers]

  • AccentJim March 4, 2020, 2:21 pm

    I’m grateful for you touching base on the PANDEMIC panic, and for the reminder to review the mortgage. Actually just applied for a refinancing via your link to Credible. Pleasantly surprised with what I was finding. Thanks for saving me money and saving me from myself.

  • Covid March 4, 2020, 2:38 pm

    I’ve made a reminder to come back in 12 months and re-read this article. I’m pretty sure that those who followed the non-financial advice contained in it will probably be pretty sorry they did (go on your merry way, don’t stock up on anything, the flu is worse, etc.). It will likely make for a great case study in the potential consequences of wishful thinking. “Gee, the Chinese had made it pretty clear that this thing was not the flu. I wonder how we couldn’t see it back then!” (As for the financial advice, staying the course is generally the best thing to do all the time, so I agree with it.)

    • Cameron March 10, 2020, 7:18 pm

      I hope I’m still around to read it…

  • Daniel March 4, 2020, 3:05 pm

    You guys look in the wrong direction, the overall death rate might be low, but for the over 50 years of age crowd it’s already unpleasant, for the 70 years plus crowd this thing IS a killer

    You do the prepping and isolation for the grandma’s and grandpa’s out there, not for the folks who read this post.

    The sensible thing for the elderly is to isolate now and not wait till its already spreading freely… And keep isolated for the next 2 months in fact.

    Let’s hope it mutates to more harmless and or we get a vaccine fast, if it goes pandemic, you will loose one of your four grandparents… That is personal.

    • Cameron March 10, 2020, 7:19 pm

      No visits to Grandma’s house till this blows over… got it!

  • Andy March 4, 2020, 3:17 pm

    Time will tell of course. But if this ‘new’ scare bug turns out to have been as overhyped as all the rest of them, and I STRONGLY suspect this is the case, maybe those panicking in these comments and elsewhere will learn a valuable lesson, and decline to play along with this particular sick little game next time?

    • Daniel March 4, 2020, 3:24 pm

      Not really, survivor bias will lead to the same response again next time

      And there are sensible moves that cost little and cause little burden now, but might be useful later… Or not.

      Stocking extra non perishable food is the simplest example, you will eat them anyway… That’s not panicky, that is just smart, worst case it was unnecessary.

  • Emily March 4, 2020, 3:43 pm

    I made a very similar post on FB earlier this week – even used the same CDC statistics.
    I think we all need to settle down and stay rational.

    One of the points of the flu comparison, in my opinion, is that it is annually a problem that kills tens of thousands of people.

    We’re not hoarding hand sanitizer, making runs on Costco for disinfectant wipes and hand soap, etc to combat the flu, canceling events of large groups or changing the way communion is distributed.

    Maybe if we did, it wouldn’t kill so many people.

  • Andrew S March 4, 2020, 3:50 pm

    The writer makes a couple of good points (namely, wash your hands and don’t try to time the stock market), but some of what is presented here is based on flawed premises. The transmission of a disease through a population is essentially a stochastic process, and as a stochastic process the likelihoods of various states at some time in the future are a function of the current state and the distributions underlying the process. For virus transmission through a population, the current state is “who has the virus now”, and the underlying distributions are likelihoods of transmission between individuals by various routes (i.e. – what are the odds I get sick if a sick person coughs on me, or if I push the same elevator button a sick person pushed?) for people of various behaviours (so the sick guy pushed the elevator button and so did I, but did he cough in his hand shortly before that and/or did I scratch my nose shortly after that?) and the distribution of these behaviours throughout the population. The figure from the Johns Hopikins study is a little naive — they’re essentially just fitting a sigmoid curve to some data points without any thought to the process generating those data points. It’s true that the infection count in an epidemic does follow a sigmoid curve. The problem is that they’re fitting to data mostly comprised of the infections in China. Nearly every city in China has been under some degree of lockdown for several weeks now, and that will obviously slow or halt transmission there as the data shows. Coronavirus is only just now beginning to explode in other parts of the world (this is the tiny upward inflection at the tail end of the data, the part that seems to not quite fit the curve), and so we’re going to see new sigmoids stacked on top of the “China sigmoid” for new outbreaks in other regions of the world. Where does it top out? The Diamond Princess, a severely flawed quarantine where healthy people were repeatedly exposed to the virus, gives us some sense of a likely upper bound. If we take no preventative measures we could see roughly 20% of the global population contract the new Coronavirus (20% taken from Diamond Princess statistics). With a 2-3% case fatality rate, that’s a pretty hefty death toll — something like 30-40 million globally, and roughly 3 million in the USA. The good news is there are things we can do to drive this number down. Returning to our stochastic process, one of the underlying distributions is the behaviour of the population. If we all have great hygienic habits and stay home when we’re sick and avoid large crowds, etc, we can probably totally stop the spread of this disease (and probably influenza too), just as China has done with their lockdowns. The bad news is there are lots of people writing articles like this one that fail to carefully consider the physical process generating the data and trying to assuage fears based on incorrect analysis, and people read these articles and believe them. These articles drive complacency toward the virus in their readers, and thus totally nullify the only tool we currently have to combat the virus. When something has as much potential for downside as this, it’s probably better for people to be scared poopless so they take preventative measures than to (possible falsely) be assured that their fears are invalid. The world isn’t ending, but if we don’t take appropriate precautions this will be very ugly.

  • Dharma Bum March 4, 2020, 8:17 pm

    I’m in the middle of a month long trek in Chile. Most of the time so far I have been in remote areas, hiking and enjoying the spectacular scenery at the bottom of the world. I’m staying at a place that has decent internet now, so I got the MMM post by email. I never knew that the market dropped 15%.
    If the market tanks and I never heard about it, did it even really happen?
    I think not.
    Keep calm and invest on.
    It’s summer in Chile.
    Life is good.
    Most Americans have NO CLUE how well off they are.
    Step outside your comfort zone for 5 minutes.

    • Laura March 8, 2020, 10:12 am

      I didn’t know the market dropped 15%till I read your reply. Lol. I knew it had dropped some and was thinking maybe it dropped enough to rebalance. Now I know! Thx!

      • Dharma Bum March 21, 2020, 1:53 pm

        Now it’s down around 30%. Yikes. Hard to stomach the fall.

  • Di Jackson March 5, 2020, 6:25 am

    I don’t see the harm in stocking up a little. If we do get sick, it means we can hunker down and reduce our chances of infecting anybody else. If this thing does become a pandemic, the slower it moves the more time our health services have to get prepared (and if we can push it more out towards the summer, then warmer weather may also come to our aid).

    Of course hand washing, walking/biking as much as possible, getting plenty of sleep and staying health etc. all help here. The healthier we keep ourselves the more we prevent the spread, and the more pressure we take off our health services at a time they may become stretched. But to my mind, doing some basic prep to allow a family to minimise venturing out for 3-4 weeks if they all get sick is also a sensible precaution of a similar nature. All good!

    So while I agree with your overall take, I’m afraid I am one of those who has stuck a couple of extra bags of dry goods and some additional tins and loo roll into the grocery order.

  • BC Kowalski March 5, 2020, 6:53 am

    Although I do tend to think like you do, I did cancel my travel plans to Mexico this spring. Though honestly I think it was an excuse I used conveniently when I really didn’t want to go – I should really spend that time to finish my bathroom remodel (also, since I had to delay it so long, Merida will be 3 million degrees by the time May comes along).

    I was surprised that the stock crash didn’t hit me in the gut like the Brexit crash when I first started investing. I likened it to rock climbing – I was terrified to fall until I finally did and the ropes caught me. It’s like you need that assurance that the ropes, or the market, will catch you and it will be OK.

  • Ivy March 5, 2020, 9:54 am

    Great write up!

    Any thoughts on purchasing Royal Caribbean stock based on the last few weeks (instead of the usual indexes)? RCL pays a nice dividend and is down almost 45% since the downturn. It’s P/E ratio is also in single digits at the moment. I feel like it’s a good buy and hold stock.

  • ev March 5, 2020, 9:57 am

    Have to disagree on this. I trust science and math more than I trust politicians. Harvard epidemiologist Marc Lipsitch estimated 40% of the earth’s 8 billion people could become infected. Other scientists say it’s a matter of when, not if that we see widescale transmissions. Asymptomatic transmission with an exponential growth rate. I trust mathematics.
    Stock market aside, I believe we will see things get worse before they get better. The infected statistics in the US are based on about 500 tests, so of course you will have low numbers.

  • Ellen March 5, 2020, 11:08 am

    A couple of thoughts:
    (1) In countries (like the US) where testing for COVID-19 is not wide-spread, the level of infection with COVID-19 isn’t knowable. Guesses can be off by powers of ten.
    (2) the S-curve for cases of the virus that combines projections and corrections for known infections may be accurate for reported cases. But, the relative containment of the virus in China where it was most wide-spread could certainly skew the overall s-curve. That s-curve of total infections is just an aggregation point for a bunch of s-curves for population groups. Do we really have enough information to make the guess, based on highly limited testing, that there won’t be a few thousand infections in Washington and California in the next two weeks? At that point, do we guess that containment in those and other US states will be as effective as containment efforts in China?
    (3) Generally, MMM adherents who are on track to be FI or are already FI understand the stunning power of exponential curves. Early days in epidemics have super fast exponential growth and the success or failure of containment efforts can have big impacts on eventual outcomes.
    (4) mortality rates in Chinese cities with persistently high pollution amounts and very high smoking rates (and lifelong smoking at that) may not be a great baseline from which to draw conclusions. But, the mortality rates by age groups were stunning. Even if US mortality rates demographic curve holds true but with rates at 1/2 those reported in China for the elderly (e.g. 14.8% mortality for infected people over 80), COVID-19 could be a significant killer in places where the elderly or people with pre-existing breathing conditions are in close proximity.

    On a personal note as an older person, I’m grateful that the disease doesn’t have proportionately higher impact on the young like the flu of 1918. So many people dying young made the death toll more tragic. And, yes, we should all be rational about evaluating our relative risk. We ordinary citizen mustachians should take mostly ordinary precautions. That said, nursing homes should trigger quite extraordinary precautions which may also require help and support from their surrounding communities.

  • Jamie March 5, 2020, 11:12 am

    While prepping for the apocalypse is silly, the “scientists and mathematicians who study this stuff for a living” *are* advising stocking up on a few weeks of food and medicine. It’s cheap and easy and our supply chains can (currently) handle everyone buying a few weeks of food. It’s the same advice we get before hurricanes, fires and floods – have the basics, don’t become a liability.

    The main determinant of the number of deaths will be how much we can flatten the curve, and the main thing that flattens the curve is isolating the infected. It’s your civic responsibility to be ready to self-isolate if you get ill, so that you’re not the one dickhead wandering around the grocery store shedding coronavirus on all the poor staff.

    I’d really appreciate it if you could make the distinction between “the walking dead” and “mild disruption still kills people, don’t add to it”.

  • scott March 5, 2020, 1:58 pm

    What is the “rational” response to something like the coronavirus? Something to think about…

    “Assume a risk of a multiplicative viral epidemic, still in its early stages. The risk for an individual to catch the virus is very low, lower than other ailments. It is therefore “irrational” to panic. But if she or he does not panic and act in an ultra-conservative manner, the virus will spread and it will become a severe source of risk.
    Hence one must panic individually in order to avoid systemic problems.
    This happens when the systemic risk is small but common to all, while an individual’s other risks dominate her or his own life. The risk of a car accident may be greater for an individual but smaller for society.
    In a way it becomes selfish to act according to what is called “rationally” – to put one’s own rankings above those of society.”

    -N. Taleb

  • thorto0803 March 5, 2020, 2:06 pm

    Don’t worry guys, the death rate is not as high as you’re being told. Trump has a good feeling about it.

    “President Trump downplayed worries Wednesday evening, telling Fox News that a 3.4 percent mortality rate announced by the World Health Organization was “false” and suggesting that it was under 1 percent. “This is really my hunch,” Trump said.” – https://www.washingtonpost.com/world/2020/03/05/coronavirus-live-updates/

  • Bryan March 5, 2020, 3:20 pm

    This article fails to touch on a critical, practical concern – failing to address the strain that a widespread, and seemingly aggressively contagious respiratory illness would place on our medical system.

    The logic of – “look how many people get sick with/die from the flu! We can handle another one of these no problem” is flawed. Just because I have several low interest loans that I’ve been able to take on successfully and incorporate into my budget, doesn’t mean that I can just take on another one because it’s something that I’m already familiar with, and handling. My ability to pay these debts without accruing additional interest or being penalized are limited to my income, a limited resource. Hospital beds, and ventilators, and proper staffing are also limited resources.

    I think a better message would be to not address the extreme contingent which probably is a fraction of a fraction of the US population (see what I did there?) but to promote a message of staying calm, but also prepared. There’s nothing wrong with preparing for, or having prepared for an eventuality. Minimizing your exposure in an outbreak or having a couple of extra weeks supply of food/water in case of a hurricane/blackout/earthquake is always a good idea. Maybe some scary bullets too – if you can afford them ; )

    Also, Bill Gates essentially spouted a truism – well…what if governments don’t handle it well? While panic is rarely justified (and probably never productive) optimism bias isn’t a great alternative either.

  • Backpack Finance March 5, 2020, 7:41 pm

    I’m not the one to fear over these things that’s for sure. However, where I’m from, the government is in complete and utter panic. Basically one step from shutting down the borders completely. So might not be such a bad idea to stock up a bit on essentials.

  • Mark March 5, 2020, 10:58 pm

    Hi MMM,

    While I generally agree with almost every single thing you say about the markets and your overall life philosophy, I DO think this time is indeed different.

    The stock market is a set-up for a deep recession now. Prior to this selloff, US stocks were extremely expensive (S&P 500 market cap vs US GDP at all time high – even higher than 1929 and 2000) and the bond market had been signaling a recession brewing via the yield curve inversion first starting in March, 2019. We also had a stereotypical blow-off top in stock prices by the S&P 500 increasing in value by ~30% in 2019 on no earnings growth whatsoever. US companies are deeply indebted (again at all time highs) as well as our government which is running $1T yearly deficits in peacetime. This debt needs to be continually rolled over with new debt at the current interest rate.

    Enter the coronavirus. Aside from the humanitarian toll, supply chains in Asia are deeply disrupted and do not seem to be coming online quickly. N2O emissions, electricity consumption, traffic congestion and other indicators the Chinese gov’t cannot fake are way down and not coming back. The effect of these shortages hasn’t even reached us yet. Then on the demand side, we are going to have millions of cases in the US. When this becomes manifest, we will panic, pull kids from school, work from home, not take trips or congregate in public places. With our economy being ~70% consumer driven, we need people to do these things. It’s going to get ugly quickly.

    Also, if some epidemiologists are correct and 50%+ of the US population eventually contracts the coronavirus, with a mortality rate of 2%, that is over 3M deaths. This is not “just the flu”.

    • Mike Laursen March 7, 2020, 12:47 pm

      Yes, part of the reason for the sell off is probably that there were people considering selling, anyway, and coronavirus was just the triggering event.

  • Luke March 6, 2020, 7:53 am

    MMM – what is your typical stock-to-cash ratio? And do you ever change the ratio? For instance, do you hold onto cash in anticipation of a near-future sale on stocks? I ask because I typically keep very little in cash in order to put my dollars to work, but in situations like this, part of me wishes I had implemented a discipline around a certain ratio so I could capitalize on the sale. With that being said, perhaps the appreciation I’d miss on holding cash would wash out any additional gains I’d get saving for a buying opportunity. Assuming you don’t hold much cash, is there any other way you recommend leveraging a sale on stocks? With interest rates so low, would you consider taking cash out of your home equity through a refinance and invest it in the market?


  • CAPT Gary Andres USN ret March 6, 2020, 9:18 am

    Fo4 the weak of stomach…..DO NOT look at your IRA (401s, TSP, etc). For the weak of heart….hug a loved one who sits in the same boat, being carried by the same current, pushed by the same wind and tossed by the same waves! However, weak of stomach and heart aside, for the strong of mind, stay the course. And for those “wide” of mustache? We are here, because we thoughtfully chose to be! As “Captain Coyote”, I order “Second star to the right…..straight on to morning!”

  • Nonesuch March 6, 2020, 9:44 am

    I think this is not a good post and I think you are not reading the data well. There are a few commonplaces that are true, sure, but I don’t think your predictions about the disease are warranted at all. You make some fair points – wash your hands, don’t freak out, market numbers will come back up some day – but others are way off the mark.

    Here are some of the points I specifically disagree with:
    1) The S curve. This model combines two very different curves – the Chinese curve, which is flattening, and the international curve, which is curving SHARPLY upward. China, the world’s second largest economy took the unprecedented measure of practically stopping its economy, and putting up to three quarters of a billion people under some form of quarantine for a period of 4-8 weeks. That’s why China’s numbers have just about halted at 80,000.

    Internationally, nothing of the sort is happening. No other country has come close to taking the aggressive measures that China has – although Korea and Singapore have done very impressive tracking. Many other countries, like the US are not mounting much of a response at all. Covid-19 has been in the US for weeks, but there still is no adequate access to testing. Correspondingly, the international curve – which we know is undercounted because of inadequate testing – is going sharply UP.

    Good news for Wuhan does not equate good news for everyone.

    Second, the prediction that up to 4 million people will catch the disease at the upper end. That seems like a cherry-picked statistic. The comparison to Ebola is not really fair – Ebola is highly contagious, but only for a brief period when the patient is very, very sick or dead. It also spreads through contact, not through droplets/ air/ surfaces, like COVID-19. Since many cases of COVID-19 do not result in serious symptoms and most people in the US in particular are in the habit of going to work when sick, it is unlikely to assume this disease will quietly dissipate – especially given the lackadaisical government response.

    Third, while on an individual level the risk of dying or getting seriously ill is low, the social impact has the potential to be enormous. About 15% of confirmed cases need pulmonary support – either oxygen or assisted breathing. Those are finite resources and there is a real risk of medical services getting overwhelmed. Even if you are not among those unlucky 15%, getting treatment and medication for other unrelated problems may be difficult. This is something people SHOULD prepare for, as much as possible.

    Fourth, economic impacts have a human toll. You can’t just reduce it to the index fund whose numbers you never check. Several sectors of the economy – like food services and travel – are likely to have a horrible few months ahead. Local restaurants WILL go out of business, taxi drivers WILL lose their jobs. While Mustachians might have financial cushions to help them weather the storm, saying the storm is no big deal seems callous towards those who are about to get swept away.

    I think this situation has all the potential to become one that we have not seen for several generations. That doesn’t mean we should declare civilization over, but we also shouldn’t let normalcy bias blind us to something that will likely have large and lasting consequences.

  • Meredith March 6, 2020, 10:06 am

    I’m probably biased because I live in the Seattle area and am early into a pregnancy, making me one of those members of the inconvenient “vulnerable population.” (The effects of the virus on early pregnancy are still an unknown.) While I can stay home and take precautions, my family members can’t do this to the same degree. If their plan of attack is to “wash hands, eat salads, otherwise live life as normal, and fight the virus like a badass,” forgive me for feeling unnerved. We all have contact with vulnerable people (whether we know them or not) much more than we realize. Some, like those at Life Care, can’t totally self-isolate. I applaud everyone who’s making sacrifices not to contract and spread the virus.

  • Lee March 6, 2020, 2:29 pm


    Thanks so much for writing this! I did not do any research on just how bad the regular “flu” was this year. I heard that it was bad, but had no idea that tens of thousands of people have died from it this year.

    Oh, and the fact the markets are being volatile right now is a good thing if you want to invest because you get to buy everything at a discount, just like you said! I think the market is the one place people tend to not like sales :)

  • Ellen O'Leary March 6, 2020, 2:51 pm

    Just curious if you know who the researcher is for this site: https://elm.nsupdate.info/virus/#world I don’t see any affiliation or identifying information on the site. Thanks!

  • Cathy March 6, 2020, 5:33 pm

    Maybe I’m a weirdo, but living in earthquake country, having a 7-10 day supply of food and water is just….a thing I have always done? It costs me very little to keep a good supply of beans and rice on hand as well as some canned veggies. We eat them and replace with fresh ones as needed. We also have a little emergency kit with some N-95 masks and other odds and ends because it’s ridiculous to not have these things before an emergency if they’re going to be important to you. When California was on fire last year we didn’t have to scramble for masks, just pull the emergency kit out of the laundry room.

    I’m hopeful that this scare will get people into better hand washing habits at least. My husband had some concern because I’m in my third trimester of pregnancy right now, but the data on pregnant women with COVID-19 and their babies so far is pretty encouraging. I can’t think of any habits we have changed, aside from my husband’s company encouraging people to work from home so he’s around a lot more if I need something heavy moved. :)

  • Andy March 7, 2020, 6:56 am

    A bit of humour.

    Australian paper prints blank pages to help tackle toilet paper shortage:


    “The editor of NT News, Matt Williams, said in an interview with the Guardian Australia that it was “certainly not a crappy edition.””


  • Heather A March 7, 2020, 7:12 am

    The media freaking out right now in response to a small number of cases is useful, I think. Unless the public is sufficently skittish, they won’t support the various levels of government in making accomodations like boosting funds for hospitals, authorizing quaranties and making school closures in hot spots. With nervousness to drive them, people will change how they wash their hands and interact. If nobody changed a thing, I don’t see why we wouldn’t see the same high percentage of infection as the Diamond Princess. That would be unmanageable all at once. It’s not really about whether I survive, (or whether my retirement savings survive), it’s whether we all get through it with the minimum of all-cause tragedy. As of the last couple of days it looks like South Korea has policies that are successfully slowing down the growth rate. That seems like the right strategy to me. So, let’s get on with the freaking out part.

    • Mr. Money Mustache March 8, 2020, 9:08 am

      Hahaha… okay, I concede you have a very good point Heather. Perhaps we can’t trust people to reduce disease transmission without scaring the shit out of them first.

      Which brings me to my next question: should we be scaring people MORE about the much larger risks in their life that I mentioned in this article? People should be TERRIFIED of cars and sofas and soda cans since they are so much more dangerous than this pandemic :-)

      As always, I am optimistically pursuing a middle ground in trying to share information. I think that too much fear is paralyzing, and it prevents people from leading good lives and causes bad risk decisions (for example getting into a gunfight over the last case of bottled water at Costco). Meanwhile, regularly biking to work and eating salad will improve your chance of survival more than any amount of handwashing or vaccine.

      So for the lucky slice of the population that happen to read THIS type of advice, less panic actually leads to better outcomes.

      • Kristine March 18, 2020, 11:43 am

        I totally agree with you 100% MMM. Which is why I read your blog, it keeps me grounded. I will continue on living just as I did before this virus. Beer thirty coming up!

  • Ecodad March 7, 2020, 11:13 am


    Once again, another good post. A 20 year mustachian here. I agree with you the vast majority of the time, so much so and to such a degree, that I tell me teenage sons that if I were to die tomorrow, that they should look to this blog for advice in my absence. I do plan on surviving this hyped coronavirus scare, though. Like you, as a former engineer, I do look to science and math to inform my emotions. Some people will indeed unfortunately die sooner than expected. Most of us will continue on, though.

    With that said, I do disagree with your advice on divorce (sort of) and investing, though.

    In regards to divorce (apologies for being late commenting on your year old post, and sorry to hear), yes, I agree it is best not to involve lawyers and to just move on as quickly and painlessly as possible, for you and for the kids, but if one is dealing with a high conflict ex, maybe even a Narcissistic or Borderline Personality Disordered individual, having need of a lawyer cannot be helped and the process will be adverserial regardless of how reasonable and rational one is. Plan on being in court until the kids are 18, and plan on the kids being affected. What you want to happen Does Not Matter in the least.

    In regards to investing, I initially preferred individual stock picking vs index investing. The Discounted Cash Flow equation one needs is

    P = R [{1+iB}^n – {1+iA}^n]/[{1+iB}^n{iB-iA}]

    P = Present Value of the Future Payments
    R = First Periodic Payment
    iB = Return on Investment, or Interest Rate per Period n
    iA = Growth Rate per Period n

    Play with it as you want. As with everything an engineer does, the results are only as good as the validity of one’s assumptions. If you believe interest rates will really be 3% for 30 years, then even Warren Buffet agrees that stocks are currently underpriced. Look at Bekshire Hathaway’s cash holdings to see what he truly believes. For what it is worth, note that this equation is wonderful for retirement planning as well and that it simplifies to the mortgage equation if iA is placed at 0…i.e. a fixed payment schedule for the duration of the mortgage.

    It takes a lot of time reading 10k’s and 10q’s, though, and the numbers cannot always be believed. Individual stock investing also takes a strong stomache. Eventually I happily gravitated more to index investing.

    In the last decade, though, I have been thinking more and more about ecological systems and have come to the conclusion that our entire way of life, and the stock market as well, is akin to a Ponzi scheme. We cannot have infinite growth on a finite planet. Malthus was not wrong, just early and misunderstood. Putting an exact timeframe on the game is impossible, but knowing how it ends is not. To be enlightened, read William Catton’s Overshoot and Bottleneck, and some of Richard Heinberg’s or John Michael Greer’s work. See Tom Murphy’s (PhD physicist) Dothemath blog as well, and read David JC McKay’s (PhD physicist) Sustainability without the Hot Air as well as Peter Kalmus’s (yet another PhD physicist) Being the Change Live Well and Spark a Climate Revolution. Investor Jeremy Grantham is interesting as well. Benjamin Graham’s (Warren Buffet’s graduate school professor and mentor) The Intelligent Investor as well as Security Analysis (the Bible of Value Investing) are must reading for any investor.

    I do not pretend to know what the answers are as to where to invest one’s money, but I own my house and a 20 acre homestead with a few outbuildings (my Ecofarm…maybe akin to your Mustachian Headquarters building, one day) and my FIRE funds are sitting entirely in a Roth account, in cash. I am more concerned about return of investment than return on investment. I have enough. I wouldn’t touch this market with anything I could not lose.

    For what it is worth, I love the Mustachian life and am generally an optimist. As David McKay says in one of his TED talks, though, just as he believes in Sustainability, he also believes in Math. As someone else once said. Sir, when the facts as I know them change, I change my opinions. What, may I ask, do you do? The sources listed above changed some of the facts as I knew them. Hope you, and all mustachians here, take them into consideration.

  • Brad Knox March 7, 2020, 11:37 am

    The mathematical model that’s shared in this post is worth a click and a closer examination. The image shown here is misleading, since the modeler actually breaks China and the rest of the world apart into separate models that are (1) better fit and (2) show much worse outcomes. For example, that website currently estimates the rest of the world will have more novel coronavirus cases than China in just 2 weeks or so.

  • Jim March 7, 2020, 4:17 pm

    If you buy stocks at a 15% discount, when they come back, you will get better than a 15% return: 1/(1-.15) = 17.65%.

  • veganomie March 7, 2020, 6:24 pm

    The origins of most of our diseases come from animal use. https://www.pnas.org/content/pnas/110/21/8399.full.pdf
    As demand for meat increases, this will exacerbate the combined issues of new antibiotic-resistant pathogens, disease outbreaks, and global climate change. It’s worth looking at how our food choices are contributing to this. We environmental scientists have been warning about this for decades.

    • Susanne Petre March 9, 2020, 1:19 pm

      To be fair, people like Paul Ehrlich have predicted doom and gloom for decades now. Mass starvation in Europe and North America, for example.
      Just like we were warned we would run out of oil – oops, oil prices are crashing!
      We humans are both smarter and dumber than we think, we can deal with this.

  • molly March 7, 2020, 8:57 pm

    I’m tired of being told not to worry by young, healthy people. As someone in one of the higher risk categories, I *do* worry about the flu. Every year. And I’m sure plenty of other people in those high-risk categories do, too. And I’ll worry less about covid-19 when it has a vaccine and treatments, which flu does. And when it’s less likely to hit entire communities at once vs the lower, more spread out infection rates of…the flu.

    I’m not panic buying soap and beans (who doesn’t keep those around all the time?), but I’m rightfully aware of the elevated risk my family has at this time. There’s plenty we can do as individuals to lower our own risk, and lots communities can do as well.

    Young, healthy folks, get a flu shot even if you’re not afraid of the flu. And remember that everyone ages.

  • WTK March 7, 2020, 9:00 pm


    I am a long term investor. I adopt “buy and forget” mindset. Why forget? This is because I rather use my time to focus on my interest with the knowledge of the investment portfolio will generate the dividends which will cover my living expenses (which is not high as I adopt the minimalist lifestyle by way of preference).

    I quit the full-time employment sometimes in May 2019. Prior to the exit, I channeled the residual income (after offsetting the living expense) to the investment portfolio which would generate more dividend after the monthly injection of fund. Since my exit, I am unable to do so. It’s alright for me as the generated dividends cover my expenses.

    With reference to the virus, it does not matter to me as I am not inclined to be in the gathering. I still maintain the clean hygeiene which I believe to be sufficient for my health being, coupled with the regular exercises in the form of daily slow jog of 8km and healthy diet.


  • Paul March 8, 2020, 12:34 am

    Thanks MM, as always advice that rings true. There will be no change to our strategy, expect maybe a bit of extra frugality to buy some extra shares of VTSAX.
    I wanted to share this handy visualization tool for Covid 19- the young man who made it is really kicking ass. The clusters and spread are helpfully visualized on a map- its updated regularly. For me, living in a “least developed country” the big take away is that all of sub saharan Africa, PNG and much of Latin America have yet to have a major outbreak. This represents a billion people who are already under served by the medical community.. and in the country I’m in oxygen supply is already limited without Covid19. So an outbreak of even a few hundred critical cases would overwhelm the system. Not that we should panic, nor worry about the long term trends in markets, but consider ways to slow the spread and provide help to reduce human suffering. Slowing the spread and getting rich countries like the USA and western Europe under control will free up much need attention and maybe compassion to assist less developed places. https://ncov2019.live/map

  • Max Schneider March 8, 2020, 11:10 pm

    Re the “well stocked pantry”: Before I move from flat to flat I try to eat everything in the old flat, so there’s one less thing to shlep. Let me tell you that even a student dorm room usually contains an awful lot of food/ressources which takes way longer to eat than ever expected.

  • Susanne Petre March 9, 2020, 7:59 am

    While I agree that this is NOT “disease X” being prepared is not about how bad something will be, but about how bad other people THINK it will be.
    That doesn’t mean you need to spend a fortune of overpriced food with shelf lives of 20 years, but a simple, rotating pantry that can sustain your family for 2 weeks is not a bad idea. That used to be the standard for many generations.
    I have a few elderly family members with existing health issues. Even if I were to be infected, most likely nothing would happen. But if THEY were to be infected, their chance of dying might be 20 or even 40 percent. So why not make sure that they don’t have to leave the house for a bit?

    Also, even if the “stock market is on sale” that does not mean much if stocks are still historically overpriced in the extreme.
    Should you hold stocks and even buy a little more? Sure. But also hold a cash position and a few hard assets.

    Index funds have not been around for long and their systemic risks are not well understood.

    • Mr. Money Mustache March 9, 2020, 9:07 am

      I agree with most of this Susanne, except about stocks being particularly overvalued (covered elsewhere in these comments but I think they are pretty close to normal, especially after the recent decline), and the age of index funds, at least if we are talking about US stocks.

      The first S&P 500 funds started around 1973, and you can track the theoretical performance back much further than that. As you get up to the half century mark, it becomes pretty safe to start making some generalizations about investment performance, and in general index funds are The Bee’s Knees.

      • Susanne Petre March 9, 2020, 12:29 pm

        Thank you for your comment!
        Okay, I should have phrased that better. Index funds have been around for a while, but they were a relatively small portion of the market.
        And yes, index funds have been the way to go for a long time. BUT, and that is the key point, when a large chunk of the market is dominated by index funds, the risk dynamics shift and simply showing how an asset class “would have” performed when it did not exist (or was a very small portion of the market) is not nearly as safe as people seem to think.

        I have shifted some of my index fund money into different assets and I have missed out on some of the gains over the last 18 months (not nearly as much now after the crash) and the only way to tell if it will pay off is to wait and see.

        Cheers and good health to you and your family!

  • Justine March 9, 2020, 8:22 am

    Thanks MMM for once again holding the sane middle-ground position. Yes, stay healthy. No, don’t shoot your neighbors.

    And in case you missed it, here are my handy dandy tips for staying safe:

  • Ashbel March 9, 2020, 10:32 am

    I agree it’s not worth panicking, but it’s worth remembering that if you are elderly and/or have respiratory problems, the death rate is around 15%. As healthy 55-year-old man, I am not terribly likely to contact it, but if I do, I’ll be fine. But if I contact it and visit my elderly mother-in-law, her risk of death would be high. So it seems like we should be encouraging people to wash their hands a lot more than they used to not because they are likely to get sick and die, but because if they get it they could easily give it to someone would face much higher odds. Say you don’t realize you have it and you practice okay hygiene give a dollar to a homeless person and you give it to them. They might have a 1 in 6 chance or worse since they live outdoors. Or maybe they just end up in the ER for a week. I guess what I’m saying is we should be thinking about other people, not our person risk. I’m a big fan MMM, but this post hit a sour not for me. (Sorry if I made a repeat comment; I read some of the comments, but not all

  • BR March 9, 2020, 10:50 am

    Are you worried about people who have decided to retire early who have their net worth in equities? Would you worry if you just retired and were expecting dividends to pay for your standard of living? And, would you worry if those dividends suddenly get slashed or eliminated and you have to get your job back?

    • Mr. Money Mustache March 11, 2020, 5:04 pm

      No! … because the 4% rule takes into account situations exactly like this (a market drop soon after you retire). Remember, dividends are likely to remain relatively stable (as they did even in 2009), and the market will recover to higher levels than ever before, long before you spend the majority of your investments.

      If it weren’t for events like this, the 4% rule would actually be the 5 or 6% rule.

  • Lynn March 9, 2020, 12:50 pm

    You say that about 2.8 million people die every year in the US and that a full 70% of those deaths are caused by lifestyle factors. I’m curious to know where you are getting the 70% figure? When I follow the link, it goes to a CDC page that says that 7 out of 10 Americans die from chronic diseases every year, not that 7 out of 10 of those deaths are caused by lifestyle factors. If the 2.8 million figure includes all deaths, that would include causes other than chronic diseases, for example, injuries and accidents. Of the deaths that are caused by chronic diseases, the CDC page does not say what percent are caused by lifestyle factors. It simply lists some factors that “could play a role in the development of” or “can affect” (which is different than “cause”) chronic diseases. Thank you.

  • Matt March 9, 2020, 3:37 pm

    I just did a cash out refinance on my home and got the funds today. I borrowed $275,000 at 2.69% and put in all in VUN.to (I’m in Canada) market is down 19% so I just made $50,000 + when the recovery happens with the push of a few buttons. The coronavirus turned out to be very profitable

  • Frank March 9, 2020, 4:13 pm


    I‘m totally sympathetic to that thought:

    „ stocks you buy today at a 15% discount from their peak, will be 15% more profitable for you over your lifetime.“

    But can you provide some mathemetical evidence?
    Or is it also possible future gains will just be delayed for a period of time until the recents highs are reached again?
    So that it‘s effectively not a discount.

    Just my thoughts

    • Timothy Kukler March 11, 2020, 3:30 am

      Let’s say one got a windfall for some reason, and was looking to invest prior to the correction, from that point of view they are discounts if one was ALREADY meaning to buy them. In my case, I was going to buy more of a certain stock because I know their industry and they have good fundamentals and feel they have good value. Prior to this correction I was ALREADY thinking it over and nearly getting off the fence ready to buy the stock. Thus it feels like 15% to me off the pre-correction price I was nearly already willing to extend. and is a reason to get off the fence, although probably not a good reason to redesign my overall strategy.

      I should rather say 20%. The correction of the market went to 20%.

      If the stock was $100, then 100 – 20% = 80, and then if it recovers 80 + 25% = 100, because 25% of 80 = 20, so in summary a -20% correction requires + 25% to get back to former levels (not counting inflation of 3% so let’s say, 26% required to get back to former levels in a 4-month recovery period.)

      I write “if” not “when” because there it might not recover, right, in that future highs may not be reached again or else not for a really, really long time. So there is risk if one takes this “discount”, but in Aug 2011 (11%) and in Aug 2015 (12%) markets did recover in just a few short months, although this time may be different. Who knows?

      It may benefit me 20% more over my lifetime, because with just $80 I may be able to buy the same numbers-of-shares as $100 would buy of the stock that I was going to buy at pre-correction prices anyway.
      More realistically I’ll still spend that same $100 as I was planning to and will get 20% more of the numbers-of-shares for it. So I’ll benefit that 20% more over my lifetime. There is the discount.

      If one is doing dollar-cost-averaging none of this matters – one invests at regular intervals like usual and blissfully ignores market timing, while luxuriously enjoying home-made coffee, which is likely a good strategy. I myself should really stop reading the news for a while. Cheers,

      • Dave March 11, 2020, 4:06 am

        Buy something that pays a reliable dividend but not too high a dividend. Then even it takes a long time for the stock to recover your getting paid 5% to wait. I believe the market won’t go to new highs for awhile. So I’m buying solid dividend paying stocks.

  • Madhu March 9, 2020, 5:43 pm

    I am so worried if the situation will get better at least before the end of May. :( Expecting a baby in first week of June and it makes things super hard. ( I am in Seattle area too)

  • Jeff March 9, 2020, 7:33 pm

    Great comparison to the flu. I did not know those statistics. Thanks for the level headed response to all this panic hype.

    We are definitely not planning on prepping and have since paused paying off the house to build a liquid saving account. This way we can take advantage of the market slump, or just continue paying off the house later. It’s good to have options.

    We just don’t watch the news to steer clear from the hype panic train. It’s disgusting what people will do to get viewers.

  • Kat W March 9, 2020, 9:44 pm

    Hello, I am new to your site and to investing, I am 60 and self-employed. I am reading your blogs as fast as I can, as well as educating myself as quickly as possible on index funds and how to invest given a shorter “runway” based on my age. I am not currently in the market. How do I know WHEN to buy Vanguard Index funds, and which funds – during what appears to be this wonderful opportunity? Thank you MMM. I resonate with your outlook & lifestyle!

    • Mr. Money Mustache March 11, 2020, 5:06 pm

      Kat – the best time to buy index funds is always decades ago. The second best time is always NOW, because on average the stock market goes up over time. And you are right – you are getting substantially more for your money when buying at today’s prices rather than those of mid-February.

      My favorite one stop shops are either the Vanguard VTI exchange traded fund, or a Betterment account set to at least 90% stocks. Good luck!

      • May March 12, 2020, 6:54 am

        Au Contraire, Mr Money Mustache! You should not be advising a self-employed 60 year old with no investment experience to invest in at least 90% stocks. No more than 40%, I would say.

        • Jennifer March 18, 2020, 1:59 pm

          Agreed, May. People should do their own research and get educated on finance. Question everything instead of accepting a blogger’s financial advice, especially on a financial decision that could cause them to lose their savings and not have enough years left to recover it.

          MMM, I’ve learned a lot from you, but not all of your financial advice is good.

          Best of luck to all

          • Mr. Money Mustache March 19, 2020, 4:24 pm

            Ahh, but if you read some of the investing books in the “Recommends/Books” section of this website, you’ll see that nearly 100% stock portfolios are better in pretty much all situations – especially for youthful 60-year-olds. Most notably Towards Rational Exuberance and The Intelligent Asset Allocator.

            Stock price fluctuations are not the same as “losing money”, and these bond-heavy portfolios are more of a psychological crutch for people who are afraid of volatility, rather than a genuine protection against running out of money. ESPECIALLY in the recent decade’s environment of super-high bond prices and near-zero yields. There is very little Bonds can do to protect you in this situation, because they are yielding nothing and their prices are already high.

            • Nordland March 22, 2020, 6:46 pm

              Latest decade was quite unique and while stocks (as of early 2020) yielded much higher average returns, bonds performed quite well last couple of years in terms of growth with 4-6% (some Vanguard funds had up to 10% growth). Now it looks like all bets are off…

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